Stagnant wages steal the show as unemployment rate drops to 17-year low

In this Jan. 30, 2018, file photo, job applicants talk with employees of Hialeah Park, at a JobNewsUSA job fair in Miami Lakes, Fla. The Labor Department on Friday said the nation’s unemployment rate was 3.9 percent, a 17-year low.

In this Jan. 30, 2018, file photo, job applicants talk with...

While the federal government delivered news Friday of its 91st straight month of hiring growth and a 3.9 percent U.S. unemployment rate — the lowest since December 2000 — all eyes turned to the nation’s lackluster growth in wages.

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Average hourly earnings were up just 2.6 percent from a year ago — paying Americans about 67 cents more an hour.

“Wage growth disappointed,” said LendingTree Chief Economist Tendayi Kapfidze. “Classic economic theory would suggest that wage inflation should accelerate, but it may be that structural changes in the labor market have reduced employees negotiation power and wages are weak despite the low unemployment rate.”

The Labor Department reported nonfarm employers adding 164,000 workers over the month, up from an upwardly revised 135,000 in March. The unemployment rate fell after holding at 4.1 percent for the previous six months largely because fewer people were searching for jobs.

The news jobwise was positive across the board. The 6.6 percent employment rate for African-Americans was the lowest on record since 1972, and the picture for Americans age 50-54 fell to 2.8 percent, more than a full point better than the rate for the workforce as a whole. The unemployment rate for adult women was down to 3.5 percent.

While state and regional data will not be reported until May 18, Federal Reserve Bank of Dallas economist Keith Phillips said the nation was, if anything, catching up with the tight labor market San Antonio employers have been grappling with for years. San Antonio’s unemployment rate hit a yearly low of 3.1 percent in October and is now at 3.5 percent. He said the low for San Antonio was 2.9 in May 1999.

The challenge going forward for Texas cities may be that, with job opportunities abundant nationwide, people will be less inclined to relocate here, Phillips said.

“Workers tend to want to stay were they’re at because they have family and friends and they have a church, communities … and it’s costly to move,” he said. “And so while we still maintain some edge in cost of living, it’s still the fact that our economic opportunities in a relative sense are not as strong as they have been in the past simply because the unemployment rate in the U.S. is at historic lows, meaning there’s job opportunities outside of Texas.”

Phillips said it was a “kind of a conundrum that wage growth hasn’t been stronger” but said there were signs it could be picking up.

“We hear from contacts and in various surveys done both in Texas and the U.S. that employers are starting to increase wages because they are really desperate to find workers,” he said.

John Dini, president of MPN Inc., a San Antonio-based coaching and consulting firm for businesses with annual revenue ranging from $1 million to over $100 million, said competition for workers was stiff even when employers were willing to raise wages.

“Employees like all the rest of us are subject to inertia,” Dini said. “If they have a job where they are generally satisfied and feel fairly compensated, they aren’t out looking. And I think the vast majority of good employees are in jobs where they feel fairly well compensated, so the market is pretty sparse.”

In some cases, employers are reluctant to hand out raises for fear the economy could turn.

“As consultants we’re working on more incentive plans, we’re working more on ways to share success with the employees,” he said. “A lot of people are asking me, ‘I’m making good money and I don’t mind sharing it, but I don’t want to permanently increase my labor cost across the board because it’s hard to roll that back.’ Everybody knows that the markets are cyclical, the economy is cyclical.”

An encouraging sign for the national economy is that the pace of hiring has yet to be disrupted by dramatic global market swings, a recent pickup in inflation or the risk that the tariffs being pushed by President Donald Trump could provoke a trade war. Over the past three months, monthly job growth has averaged 208,000.

Much of the economy's durability, in fact, is due to the healthy job market. The increase in people earning paychecks has bolstered demand for housing, even though fewer properties are being listed for sale. Consumer confidence has improved over the past year. And more people are shopping, with retail sales having picked up in March after three monthly declines.

With qualified job applicants harder to find in many industries, employers have become less and less likely to shed employees. The four-week moving average for people applying for first-time unemployment benefits has reached its lowest level since 1973.

Bill Petrella, president and general manager of Hotel Emma and former president of the San Antonio Hotel and Lodging Association, said that with the hospitality business booming along with the local and national economy, San Antonio’s tourism industry has long been paying workers more to stay competitive.

“I think that there’s a perception that we’re a low-paying industry, but that’s certainly not the case. Our starting hourly wages are typically well above minimum wage,” he said. “Hotels are like small cities, a microcosm of, you know, every industry. … We have engineering services and we have food, beverage, administrative, et cetera. So we’re always as an industry looking for great people.”

At Bubble Bath Car Wash, which will opening a sixth location in June, keeping talent has become an all-out challenge that has resulted in increasing salaries, adding health and dental benefits, having team building games and making a point of promoting from within rather than trying to “drag and drop” from outside.

“As pulling staff in, it’s been one of our No. 1 concerns,” Director of Operations Nicholas Lopez said. “We do face challenges when it comes to hiring staff at all levels from our upper management to just our regular scrubbers.

“Customer service and our staff makes or breaks our business,” Lopez added. “We’re a small business, family owned, it’s just me and my dad, and so trying to balance labor costs versus income versus raising our costs SAWS (San Antonio Water System) to CPS, we walk a very fine line with our people. Our growth has been great, we’ve been expanding quickly and we’re trying to make sure that our brand and who we are stays very concrete.”